$4mn for Panama transit: Cost of avoiding Hormuz

Global trade flows are shifting as businesses pay up to $4 million to transit the Panama Canal, avoiding the bottlenecked Strait of Hormuz. The Panama Canal Authority reports that as Iran and the US continue to squeeze the shipping route in West Asia, demand for canal slots has skyrocketed. While passage is typically managed via reservations, those without them must bid in auctions.

Rodrigo Noriega, a lawyer and analyst in Panama City, said companies now view the canal as a safer and more cost-effective alternative to the risks of drones and missiles in West Asia. “All of this is affecting global supply chains,” Noriega said, adding, Panama is maximising its earnings from this increased demand.

The average crossing fee is between $300,000 and $400,000, but urgency has driven additional auction costs to an average of $425,000. 

Ricaurte Vasquez, the ca­n­al’s administrator, cited a specific instance where a fuel ship paid an extra $4 million to re­direct from Europe to Sing­a­pore. Oil firms have paid $3 million in excess fees to accelerate passage am­id soaring oil prices. Vasquez clarified the costs reflect last-minute shifts and urgency rather than a permanent rise in market rates.